Aave plans to launch a decentralized stablecoin GHO

Recently, the Aave community put forward a new proposal aimed at introducing a decentralized stablecoin GHO pegged to the US dollar. If this proposal is approved, it will bring significant changes to the Aave ecosystem.

The design concept of GHO is a completely decentralized stablecoin supported by over-collateralized assets. It will be backed by multiple collateral types on the Aave protocol and governed by the Aave community. This design aims to ensure the stability and transparency of GHO.

As a decentralized stablecoin on the Ethereum mainnet, GHO will be created by users through providing collateral. Similar to other lending operations on the Aave protocol, users need to provide collateral at a specific collateralization rate to mint GHO. When users repay the loan or are liquidated, the corresponding GHO will be destroyed.

It is worth noting that GHO introduces the concept of "facilitators". Facilitators can be protocols or entities that can generate and destroy GHO tokens in a trustless manner. Each facilitator needs to be approved by the Aave governance body and is assigned a specific "bucket" that represents the GHO cap that the facilitator can generate.

The borrowing rate of GHO will be determined by the Aave community and will remain relatively stable. However, the community can make necessary adjustments based on market conditions. This design retains the flexibility of the borrowing rate model of the Aave protocol.

To encourage community participation, GHO has also designed a discount model. Participants in the security module (stkAAVE holders) will have the opportunity to receive a discount on GHO loan interest rates. This not only increases the utility of the AAVE token but also provides additional incentives for governance participants.

The launch of GHO is expected to bring additional revenue to the Aave protocol. The majority of the borrowing interest paid by users when creating GHO through the Aave protocol will go directly into the Aave DAO treasury. This additional revenue can be used to support ecosystem development, reward contributors, or for other purposes decided by the DAO.

From a market application perspective, GHO is not only targeted at the cryptocurrency community but may also expand into broader scenarios. Especially on Layer2 networks, due to their low transaction fees and the growing trend, GHO may find more application opportunities.

Currently, the community is voting on whether to advance the GHO project. If approved, initial interest rate and discount rate proposals will be put forward, and these parameters can be adjusted through governance in the future. Meanwhile, institutions such as OpenZeppelin and PeckShield will conduct security audits on GHO in the coming weeks.

Overall, the launch of GHO may bring new vitality to the Aave ecosystem while providing a new stablecoin option for the Decentralization finance sector. However, its ultimate success also depends on community support and market acceptance.